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Water Funds

Water Funds. Latin American Water Funds Partnership Experiences from Scaling Up Watershed Conservation Fernando Veiga Rebecca Tharme The Nature Conservancy. Investing in Green Infrastructure. Ecosystems provide services to society

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Water Funds

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  1. Water Funds Latin American Water Funds Partnership Experiences from Scaling Up Watershed Conservation Fernando VeigaRebecca Tharme The Nature Conservancy

  2. Investing in Green Infrastructure Ecosystems provide services to society Growing evidence that the conservation and restoration of ecosystems are key to guarantee water security for human needs, and in many cases represent the most cost-effective solutions Water funds rely on concept of ecosystem servicese.g. erosion abatement; sediment reduction; nutrient filtration; flow regulation; flood control - clean reliable water sources Water Funds invest in conserving watersheds to improve or maintain water-related benefits and regulate water-related risks

  3. Water Funds Users Providers ECOSYSTEM SERVICES MODEL WaterFund Board Financial Fund $ $ Quito Ecuador Population 2 million Condor Bioreserve & Surrounding farmlands WATER SERVICES WF is a conservation trust fund that finances watershed protection

  4. Water Funds are effective tools for watershed conservation because they: • Connect suppliers of ecosystem services with beneficiaries, providing direct benefits downstream and improved livelihoods upstream (efficient) • Mitigate water scarcity and pollution problems at the source rather than end-of-pipe treatments (effective) • Provide a sustained funding mechanism with a flexible governance structure to allow for adaptive management of risks and opportunities (sustainable)

  5. Business case São Paulo, Brasil • Most important water supply area in Brasil - 50% of São Paulo metropolitan area, 9 Mill people • Poor land-use practices in sensitive areas undermining system capacity to serve growing demand • Invest models estimated mean erosion rates and sediment loads – 14 300 ha of priority areas (3% of total area) for water fund investments = 50% of sediments abated= 600 000 tons per year • US$ 4.9 million/year of potential reduction in water treatment and drainage costs (excl. other potential benefits e.g. contaminants reduction)

  6. Business case Cauca Valley, Colombia - Most important sugar cane production area in country (200 000 ha)- Increased pressure on water resources- potential future reduction from 5 to 4 irrigation cycles with current degradation trends Sugarcaneharvest(milliontons) 8.7% decrease in productivity Loss of $33 million/ year Loss of $250 / ha / year Sugar cane mills are main funders- for water supply assurance Production with 4 cycles Production with 5 cycles Source: SugarCaneResearch Centre - Cenicaña– estimationsAsocaña

  7. Feasibility Study Economic Rationale Bogotá, Colombia Reducing sediment loads by 2 Million tons Projectedsavings USD 3.5 M per yearin treatment costs 10:1 Water quantity Quantity of sediments (Component of Quality) Regulation significant but not quantified m3/ha/year Ton/ha/year Conserved Area Uses inside Protected Area Outside Protected Area Sources: CIAT 2007, Bogota Water Fund

  8. 2000: $21 000 start-up 2013: ~ $13 000 000 • Since 2006, 2% of the water utility revenues • Annual investments of nearly $2-3 million (leverage) Fund Progress • 2 million residents • Condor Bioreserve: 2.5 million acres, exceptional biodiversity, inc.760 bird spp.; 28 rivers Importance • EMPAAQ (Quito’s Water Agency); Quito Electric Company; USAID; Swiss Development Corporation; CerveceriaNational (beer company); Tesalia Springs Co. (water bottling company) Partners • Páramo and forest as biodiverse natural water tower • 80% of water for the city of Quito, Ecuador, from three protected areas and their buffer zones • Conversion with land pressures reducing ability to provide services Proof of ConceptQuito Water Fund

  9. Permanent support through various programs to communities close to the water sources • Enrolled 30 500 children in environmental education programs • Over 200 families engaged in community development projects in rural basins Benefits to People • 85 000 ha of public lands protected • 19 000 ha of private lands restored and/or under Best Management Practices Conservation Progress Proof of ConceptQuito Water Fund

  10. Steps to establish a Water Fund Pre-feasibility and Evaluation Which ecosystem services? Where is the area of influence? Who are the stakeholders? Maturity Financial sustainability Consolidation of field activities and monitoring Design Feasibility studies: Environmental Socio-economic Institutional and legal Operation Contracts with local stakeholders Field activities Fund-raising Monitoring Negotiation Institutional arrangement Partners’ commitment (financial and technical)

  11. Contribution to aquifers Contribution to flows Sediments Coverage Biodiversity connectivity Science-basedapproach Highest priority areas for conservation Water for life and sustainability

  12. Investment Portfolio

  13. Investments • Private and communallands • Conservationagreements • Bestagricultural and cattleranchingpractices (silvopastoralsystems) • Riparianforests • Reforestationand restoration • Incomegeneration • Environmentaleducation • Publicareas • Implementation of managementplans • Park guards

  14. Peru Ecuador Colombia Brasil

  15. WATER MONITORING Water Monitoring Sites • Quality • 9 sites • 9 parameters • Precipitation • 3 sites • Flow • 3 sites Community Engagement

  16. BiodiversityMonitoring • Importance of riparianareas • Terrestrialmonitoringof páramos and forestsalsoshowingfirstencouragingresults(e.g. forest bird species in restoration areas) Paulo Petry

  17. Community monitoring4218 families benefited upstream in watershed

  18. Monitoring of multiple water funds ongoing

  19. TNC, FEMSA Foundation, IDB and GEF Launched in 2011

  20. Over the next 5 years $27 million in Seed Capital will support direct investment of $143 million in 32 Water Funds, leveraging additionally $500 million providing long-term payments for environmental services to rural communities, and securing clean and sufficient water and effectively conserving 7 million acres for 50 million people in Latin America Thevision

  21. Goals Support the establishment and strengthening of the WFs Identify and share best practices Development of regional projects Support monitoring initiatives Keep developing the business cases 6. Raise awareness (Where Does Your Water Come From?) 7. Support the green infrastructure approach in water sector loans (IDB and CAF) 8. Partner with water regulators with the aim of including the watershed conservation costs in water tariffs (ADERASA – PE, CR, BR)

  22. Water Funds as at June 2013 Status 15 in evaluation 14 in design 13 operating 1 mature • Opportunities • Exchange lessons learned • Regional players (public and private) – reduction of transaction costs • Diversity and cooperation • Upscale (implementation channel) • Expand to new geographies (Africa, USA)

  23. Thanks www.fondosdeagua.org

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